How to Pay for that Parchment
Paying for your MBA is no small task. Just ask Oliver Robinson, who will soon complete his first year in the MBA program at the Wharton School of the University of Pennsylvania. Before packing up for Philadelphia, after Robinson spent four years in the U.S. Navy, he and his wife sold their home in Charleston, S.C., and both their cars. The money they made from those sales help with tuition payments but still don't come close to covering the $62,160 total cost of a Wharton MBA.
Thus, this semester alone, the 26-year-old relies on $9,157 in Federal Stafford Loans, $750 in Federal Perkins Loans, a $1,500 grant from Wharton, and a $3,000 loan through Wharton and Citibank. For living expenses, Robinson's wife Holly chips in earnings from her medical research job at MCP Hahnemann University School of Medicine. They also draw $950 a month from the Montgomery G.I. Bill.
That's about par for the course at most B-schools. "The main way students pay for the MBA is through loans and personal funds," says Don Martin, associate dean of admissions at the University of Chicago Graduate School of Business, where 75% of students get some financial aid from the school. Martin says some students still receive funding from their employers, but because of the sour economy and students' reluctance to be bound to their companies, he estimates corporate sponsorship has fallen 20% to 30% in the past 10 years.
At Chicago, like other B-schools, the loan process starts at the federal level. Prospective students fill out the Free Application for Federal Student Aid (FAFSA), available on the Web at www.fafsa.ed.gov. Based on savings, investments, and income statements, the government determines students' eligibility for Stafford Loans, which go as high as $18,500 per academic year. The current interest rate is 5.39%, which bumps up to 5.99% after graduation. Students who demonstrate greater need can qualify for the Federal Perkins Loan as well. Fixed at 5% interest, that loan may be as large as $6,000 per year. Interest starts after graduation.
On top of federal aid, most B-schools offer institution-specific loans through banking partners, such as the CitiAssist loan at Wharton that Robinson procured. The loan terms and rates vary by school. Some schools, like Stanford University, require students to submit separate financial aid forms directly to the school. Would-be MBAs need to be aware of these deadlines as well.
MBAs need not be saddled with loans. With a little digging, resourceful students can supplement financial aid packages with grants, either from private groups or the B-schools themselves. A good place to start is BusinessWeek Online. First, go to businessweek.com, then click on the B-schools tab. Scroll down to the link for Financial Aid. There you'll find Q&As with the financial aid directors of 29 B-schools and links to helpful financial aid Web sites.
Another possible option for cash-strapped students is a teaching assistantship. Southern Methodist University in Dallas will begin offering assistantships as part of aid packages this fall. At SMU, like most B-schools, a TA can expect a per-semester stipend of about $1,500 for 10 hours of work a week, usually grading papers and leading discussion sections. That's time you won't get to spend on your own work, though.
For a handful of students at each school, stellar GMAT scores and undergraduate GPAs result in full scholarships. More often, MBA students resemble Robinson, who estimates he'll graduate about $50,000 in the hole. Still, he's not worried about repayment. After all, the average starting base salary for a Wharton MBA in 2001 was $98,218. That makes taking on loans a whole lot easier.
By Brian Hindo